<PAGE>

                                                                    EXHIBIT 10.2

                                  May 14, 2004

Mr. Francis S. Kalman
McDermott International, Inc.
757 N. Eldridge Parkway
Houston, TX 77079-4411

                             PERSONAL & CONFIDENTIAL

Re:      Key Executive Retention Program - MII

Dear Mr. Kalman:

In order to retain and solidify the dedication and continued efforts of key
executives during this difficult period, the Compensation Committee (the
"Committee") of the Board of Directors of McDermott International, Inc. (the
"Company") has approved the implementation of a Key Executive Retention Program.
I am pleased to advise you that you have been selected for participation in this
program.

The program is designed to provide periodic vesting over the next twelve months
of shares of restricted stock ("Restricted Stock") granted under the 2001
Directors & Officers Long-Term Incentive Plan (the "LTIP") and periodic payments
of cash over that same twelve-month period, provided that you continue to be
employed by the Company or a subsidiary of the Company on each of the applicable
vesting dates.

I.       The Cash Retention Payments

         You will receive periodic cash retention payments which, in the
         aggregate, equal 50% of your annualized base salary on January 1, 2004,
         provided you are employed by the Company or a subsidiary of the Company
         on each of the applicable "Cash Vesting Dates". Each periodic cash
         retention payment shall be paid on or about the applicable Vesting
         Date, in the following gross amounts:

<TABLE>
<CAPTION>
                                         Retention Payment as a Percentage
Vesting Date                             of annualized 1/1/04 Base Salary
------------                             --------------------------------
<S>                                      <C>
May 15, 2004                                         10%
August 15, 2004                                      10%
November 15, 2004                                    15%
March 1, 2005                                        15%
</TABLE>

II.      The Restricted Stock Retention Award

         Effective as of May 13, 2004 (the "Grant Date"), the Committee awarded
         to you a grant of 22,857 shares of Restricted Stock under the LTIP.
         Restrictions on 40% of the stock award will be removed on August 15,
         2004, 30% on November 15, 2004 and 30% on March 1, 2005 (the
         "Restricted Stock Vesting Dates"), in each case provided that you are
         employed by the Company or a subsidiary of the Company on the
         applicable Restricted Stock Vesting Date.

         On the Grant Date, you will have the right to be issued the total
         number of shares of common stock of the Company shown above.
         Certificates evidencing such shares will be issued in your name,
         subject to the terms and conditions of the LTIP. Beginning on the Grant
         Date, you will have full voting rights with respect to the shares of
         Restricted Stock granted in connection with this award, and you will
         receive cash
<PAGE>

         dividends paid, if any, with respect to those shares (in each case,
         until you forfeit those shares as provided in this Letter Agreement or
         sell those shares after the applicable Restricted Stock Vesting Date).

III.     Termination of Employment Prior to Vesting

         Except as provided below, if you terminate employment with the Company
         and all subsidiaries of the Company prior to March 1, 2005, all
         unvested cash retention payments and all unvested shares of Restricted
         Stock issued to you on the Grant Date shall be immediately forfeited.

         If your employment with the Company and all subsidiaries of the Company
         is involuntarily terminated for reasons other than "cause", you will
         continue to be entitled to receive the cash retention payment that
         would have vested on the Cash Vesting Date immediately following your
         termination of employment, payable at the same time and on the same
         basis as if you had remained an employee. In addition, you will vest in
         the shares of Restricted Stock that would have vested on the Restricted
         Stock Vesting Date immediately following your termination of
         employment, at the same time and on the same basis as if you had
         remained an employee. All other unvested cash retention payments and
         unvested shares of Restricted Stock shall be forfeited immediately upon
         such termination of employment. Whether or not a termination of
         employment is for "cause" shall be determined by the Committee, in its
         sole discretion.

         If a Change in Control of the Company occurs (as defined in the LTIP),
         all unvested shares of Restricted Stock granted hereunder shall
         immediately vest and be freely transferable, and all Cash Vesting Dates
         shall be accelerated and such Cash Retention Payments shall be
         immediately payable.

IV.      Tax Consequences

         Restricted Stock. The Company has been advised that for U.S. federal
         income tax purposes, in the opinion of counsel, as of each Restricted
         Stock Vesting Date, you will be treated as receiving compensation
         taxable as ordinary income equal to the fair market value of the shares
         that vest on that date. Alternatively, you may elect to have the Fair
         Market Value of all of the Restricted Stock included in your taxable
         income and reported on IRS Form W-2 as of the Grant Date.

         In addition, all dividends paid, if any, to you in respect to shares of
         Restricted Stock during the Period of Restriction shall be considered
         wages paid to you by your employer and, therefore, shall be included in
         your taxable income and reported on IRS Form W-2 in the year in which
         the restrictions lapse.

         By acceptance of this letter, you agree that upon the lapse of the
         restrictions with respect to the shares of Restricted Stock issued to
         you, you will promptly pay to the Company the amount of income tax
         which the Company is required to withhold in connection with the income
         realized by you as a result of such lapse of the restrictions (unless
         you have previously made the election, and paid the tax, referred to
         above). Please note that the Committee has determined that no request
         for the payment of taxes by share withholding will be approved in
         connection with shares of Restricted Stock granted hereunder.

         Cash Retention Payments. For U. S. federal income tax purposes, each
         cash retention payment is taxable to you as wages and reported on IRS
         Form W-2 in the year received.

V.       Securities and Exchange Commission Requirements

         If you are a Section 16 insider, Restricted Stock granted to you
         hereunder must be reported on a Form 4 before the end of the second
         business day following the Grant Date.

         If Section 16 applies to you, you are also subject to Rule 144. This
         Rule is applicable only when the shares are sold, so you need not take
         any action under Rule 144 at this time.

<PAGE>

         If you are covered by these requirements, you have already been advised
         of your status. If you become a Section 16 insider at some future date,
         reporting will be required at that time.

         Other Information. If you have any questions concerning any of the
         information set forth above, please do not hesitate to contact L. J.
         Sannino at 281/870-5016.

         Neither the action of the Company in establishing the Key Executive
         Retention Program, nor any action taken by it, by the Committee or the
         Board of Directors in connection with this program, nor any provision
         of this Letter Agreement shall be construed as giving you the right to
         be retained in the employ of the Company.

         Please acknowledge receipt and acceptance of all of the above by
         signing both this letter and the enclosed copy thereof and returning
         such signed copy to the Company at Post Office Box 61961, New Orleans,
         Louisiana 70161-1961, attention of L. J. Sannino, and marked "Personal
         and Confidential" within 30 days from the date hereof.

                                                Very truly yours,

                                                McDERMOTT INTERNATIONAL, INC.

                                                B. W. Wilkinson
                                                Chairman of the Board

         ACCEPTED:

         _________________                                       ____________
         Francis S. Kalman                                           Date